BI plans to lure export earnings back home

JAKARTA (JP): Bank Indonesia (BI) will provide exporters incentives to lure their billions of dollar earnings parked overseas back home, acting governor of the central bank Anwar Nasution said on Thursday.

Anwar said the central bank planned to provide, among other things, an export swap facility to encourage exporters to repatriate their dollar earnings to support the rupiah.

"Exporters want a certain assurance that the rupiah will not weaken once they bring their dollars back," Anwar said following a meeting with major exporters.

The meeting was convened at the initiative of the National Business Development Council (DPUN) to discuss efforts to shore up the rupiah, which has remained weak despite a robust increase in exports.

The central bank chief reassured exporters at the meeting that the government had no any intention of imposing capital controls and would stick to the free-floating system for the rupiah.

He said that under the export swap facility exporters would not be subject to the risk of rupiah fluctuation when they needed to convert their dollar earnings into rupiah.

The swap facility would allow exporters in need of imported raw materials to buy dollars at the same rate as when they exchanged them with rupiah, Anwar added.

"I asked them (exporters) to cooperate with the central bank to help stabilize the rupiah.

"If you want a stronger rupiah, you need to increase export earnings and bring them home," Anwar said.

During the meeting, exporters raised their concerns to the central bank about the 'credit crunch', as most banks have virtually stopped lending since the 1997 financial crisis, he said.

Anwar said exporters also complained about the refusal by overseas banks to accept letters of credits opened at Indonesian banks.

"Many exporters therefore prefer opening their letters of credit at foreign banks, thus requiring them to park their export earnings overseas," he added.

Anwar also referred to jitters among foreign export companies about the possibility that the central bank might impose capital controls in a bid to defend the rupiah, which last month fell sharply to a 21-month low of almost Rp 9,500.

"I reassured them (foreign companies) that we don't have any intention to adopt capital controls," he said.

DPUN chairman Sofyan Wanandi said exporters usually keep some 20 percent to 30 percent of their export earnings in foreign banks.

"They bring back part of their export earnings only to finance local costs," Sofyan added.

The Central Bureau of Statistics announced on Tuesday that Indonesia's export earnings in June reached a record high of $5.29 billion.

However, the boost in foreign exchange earnings did not help strengthen the rupiah. The local unit only rose slightly on the back of easing political tensions.

Sofyan said most large exporters and foreign companies operating in the country kept their earnings abroad because of the still fragile condition of domestic banks.

He said exporters had expressed their commitment to repatriating their dollar earnings if a swap facility was available and if the conditions of local banks improved.

The existing swap facility, he said, was only available for investment needs and its fee was also relatively high.

Bank Indonesia therefore promised to soon introduce export swap facilities with a lower fee than that imposed on investment swap facilities.

"Because exporters bring home dollars, BI can charge them a lower fee," he said, adding that the fee might only be around 1 percent to 2 percent, compared to 10 percent to 15 percent under the investment swap.

Sofyan said that some 70 percent of Indonesia's top exporters, including foreign giants like copper and gold miners PT Freeport Indonesia, were represented at the meeting. (bkm)